SECRET
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144101
MDHOAN 0901
SECRET FM FCO
TO DESKBY 06003OZ HONG KONG
TELNO 424
OF 052015Z MARCH 92
Mais 100/2
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
TOP COPY Q DIST?
la
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PERSONAL FOR GOVERNOR FROM BURNS, AUSS
PEKING PERSONAL FOR AMBASSADOR
UKREP JLG PERSONAL FOR MR GALSWORTHY
9
613
MY TELNO 422: HONG KONG BUDGET (AND CONFIDENTIAL FINANCIAL DIALOGUE)
1.
THE POLITICAL ADVISER WILL NO DOUBT MAKE THE POINT THAT IF THE CHINESE HAVE VIEWS ON YOUR BUDGET POLICY, THE BEST FORUM FOR DISCUSSION IS THE CONFIDENTIAL FINANCIAL DIALOGUE. PUBLIC POLEMICS ON SUCH MATTERS ARE NOT CONDUCIVE TO OUR COOPERATION
FOR A SMOOTH TRANSITION.
2.
IN THIS CONTEXT YOU SHOULD BE AWARE THAT WE WERE A LITTLE SURPRISED TO SEE THE PROMINENCE WHICH THE FINANCIAL SECRETARY GAVE IN HIS BUDGET SPEECH TO THE LATEST ESTIMATE FOR THE FISCAL RESERVES IN 1997. WE UNDERSTAND THE NEED TO SUSTAIN DOMESTIC
AND INTERNATIONAL CONFIDENCE IN HONG KONG'S ECONOMIC POSITION.
THE FISCAL POSITION IS INDEED VERY ENCOURAGING AND REASSURING. HOWEVER WE ARE CONCERNED LEST THE CHINESE SHOULD LIGHT ON THIS FIGURE, WONDER WHETHER THEY SETTLED FOR TOO LOW A FIGURE IN THE AIRPORT MOU, AND EXPLOIT IT TO ARGUE FOR OBJECTIVES INIMICAL TO OUR INTERESTS: EG A SET-ASIDE FUND FOR CIVIL SERVICE PENSIONS (WHICH INCIDENTALLY COULD TRANSFORM CONSIDERATION HERE OF THE HMOCS PROBLEM) OR THE MINIMISATION OF CONTINGENT LIABILITIES OUTSTANDING IN 1997 - OR FURTHER SET ASIDE TO COVER THEM.
3.
THE TREASURY WERE A LITTLE CONCERNED TO SEE THE WORD ''COMMITMENT' IN PARA 38 REGARDING THE MOU PROVISION ON THE FISCAL RESERVES, BUT WE CAN SEE THAT ALTERNATIVE DRAFTING WOULD HAVE BEEN DIFFICULT HERE.
4.
INCIDENTALLY THE TREASURY HOPE THAT COMMENTATORS HERE WILL NOT PICK UP THE LAST FOUR SENTENCES OF PARA 32 OF THE SPEECH ABOUT THE ECONOMIC AND SOCIAL COSTS OF A DIFFERENT
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